What's the worst part about freelance work

Avoid a crash! 5 tips to help you plan your freelance financially correctly

Every freelancer is also an entrepreneur. Like any company, a freelancer can only be successful if they consistently earn more than they spend. Financial planning is therefore a central topic for every freelancer. If you are thinking of starting a freelance job, you should definitely read this post. It provides you with 5 steps to plan your financial future.

1. List the startup investments for your freelance work

If you're starting out as a freelancer, you will likely need computers, software, office equipment, etc. Make a two-column list. In the first column, you should list the type of investment. In the second column you list the respective costs. Make the list as detailed as possible to avoid unexpected investments during your freelance work as much as possible. Also think about what you already have and what you can possibly still use.Keep the investment as low as possible. You can find more details on this in my free e-book “The 10 worst mistakes as a freelancer”.

Typical start-up investments:

  • computer
  • software
  • Office furniture
  • Cellphone
  • printer
  • Logo & corporate design
  • Business Cards
  • Letterhead
  • Website

2. List ongoing expenses

In addition to start-up investments, you will certainly also have ongoing expenses. Every month there may be costs for office, internet & telephone, leasing rates, etc. As with the start-up investments, you should also enter the current expenses in a list. Multiply the sum of these costs by a factor of 12. Then you see the current expenses for a whole year.

Typical ongoing expenses:

  • Rent for office
  • Leasing rates for motor vehicles
  • your living expenses (rent, groceries, clothes etc)
  • Social contributions (health insurance, long-term care insurance, pension insurance)
  • Telephone and internet
  • mobile phone contract
  • Insurance
  • Contributions
  • GEZ
  • Reserves (very important for unforeseen expenses)

    3. Calculate the cash burn rate

The cash burn rate describes the speed with which the financial resources are used up. That means you will receive the exact number of months until your start-up capital is used up. I find it particularly important to calculate this value. It shows you your time horizon until the financial resources are used up and can save you from over-indebtedness.

Here is a calculation example:

You have set aside 20,000 EUR for your work as a freelancer. Your initial investment from point 3 is EUR 5,000. Your running costs from point 4 are 1,500 EUR.

Cash burn rate = (20,000 - 5,000) / 1,500 = 10 months If you do not generate any income, your start-up capital will last exactly for 10 months.

I recommend that you achieve a period of at least 12 months. If this is not the case, you have exactly three adjusting screws that you can use.

  1. Save some money to increase your starting capital
  2. Try to reduce your start-up investments (e.g. buying used computers)
  3. Reduce the monthly fixed costs (smaller office, personal savings)

4. Set your income goal for the first fiscal year

Points 1-3 not only help you to keep track of your expenses. They also show you how much you need to earn in order to make your freelance work profitable and to avert debt. In some industries it can take a little longer for a positive cash flow to arise, i.e. for the amount of income to exceed the amount of expenditure. In most liberal professions, however, this should be the case after two years at the latest.

My formula for calculating the income goal for the first fiscal year:

annual income target = ((initial investment / 3) + (ongoing expenses per month * 12)) x 1.3

In our specific example

((5,000EUR / 3) + (1,500EUR x 12)) x 1.3 = EUR 25,566.67

Make sure that your income goal is always visible, e.g. on the mirror in the bathroom or as a desktop wallpaper. Give EVERYTHING to achieve this goal!

5. Check regularly

Set fixed dates on which you can check the current financial status of your freelance work. View your bank statements and compare your income with your expenses. I always do this at the end of every quarter. If you have a tax advisor / financial accountant, you will usually receive a BWA (business evaluation). In it you will find the sum of income and expenses. Compare these values ​​with the financial planning for your freelance work.


In addition to a good positioning on the market, in my opinion profitability is one of the most important success factors for freelance work. Especially at the beginning, the focus must be on financing in order to avoid over-indebtedness. High debts and the associated interest charges make us unfree and sooner or later can lead to the failure of a professional activity.

Finally, I would like to recommend the following tips for your freelance work:

  • List each cost item in detail and plan as precisely as possible (this post should help you with that)
  • Build up reserves every month and take them into account in your expenses
  • Keep investments and ongoing expenses as low as possible, especially at the beginning

I hope this post was helpful for you and you liked it !? What tips do you have when it comes to financial planning for freelance work?